China will decrease exports and focus on reducing inflation
China’s export growth will slow, but what does that mean for the West Coast ports?By Stas Margaronis, AJOTThe Chinese Ministry of Commerce says China’s export growth will decline, probably causing some factories to close, according to Xinhua the PRC’s state news service. The Ministry said that as domestic and global business conditions deteriorate, some manufacturers and exporters might struggle in the months ahead, with even some going bankrupt, according to Zhang Ji, director general of the Ministry’s department of mechanical, electronic and high-technology industries. Slowing Export Growth Export growth is declining according to the General Administration of Customs, which said that first-half exports increased by 24% to $874.3 billion, compared with 35.2% growth during the same period for 2010: “The export situation is getting worse, although there is still double-digit growth. The slowdown will continue in the second half,” said Zhang. Zhang added, “Factors like rising costs for labor and raw materials, yuan appreciation and tighter monetary policy are and will be hurting Chinese exports.” Yao Jian, spokesman for the Ministry, said at a recent press briefing that the Chinese government will take steps to stabilize exports, including tax rebates, financing and credit insurance, in the belief that exports will slow during the rest of the year. Port Sees Less Imports Some evidence of this change is being seen at the Port of Long Beach where a spokesman, Art Wong, noted that imports for the first six months are “flattening” in part as a result of reduced imports from China, which accounts for 50% of the port’s business: “For the first six months volumes of imports are up about 6%, since trade with China accounts for half of our business, we should assume that imports from China reflect this. We did see an increase in dollar values from China of 13% but this reflects some decline in the value of the dollar. What I can tell you is China is clearly going into the auto business: we have seen a 27% increase in car parts and a 40% increase in tires,” Wong said. Tong Zhu, managing director commercial group for the Port of Tacoma says, “We show imports from China down by 7.4% for the first half of 2011. We see this mostly in areas such as footwear and textiles. US consumer market is still the biggest export driver for China and the decline of the housing market and the adverse impact on consumer spending is reducing Chinese exports. However, she says, the Port of Tacoma still managed a 4.9% increase in container volume for the first six months of 2011 compared to 2010. Inflation Lurks Xinhua said some textile factories closed recently as operating pressures intensify. It quoted Zhang as saying that profit margins may be declining and “some of them will probably die out, but the majority will survive… It is time for them to enhance their competitiveness.” At the same time, Communist Party of China (CPC) leaders announced a series of price stabilization measures to ease the threat of higher prices, according to Xinhua. China’s price index soared to 6.4% in June well above the government 4% annual target. One priority is to accelerate affordable housing while keeping tight controls on the property market so as to keep prices under control, Xinhua reported. A second priority is to boost domestic demand and enhance financial supervision of businesses. A third priority is to encourage and develop emerging industries, upgrade traditional industries and support the service sector. The question is whether these initiatives will lead to more imports and greater openness for FDI (foreign direct investment) and help get corruption under control.